Starbucks CEO Howard Schultz is harming shareholders by damaging the brand he globalized by criticizing President Trump’s executive order on Syrian refugees and travel bans.
Schultz wrote to Starbucks employees on Sunday, January 29, following Trump’s announcement on the previous Friday. The coffee chain CEO issued a broad-based attack against Trump.
The company’s share price has dropped lower (about four percent) following a disappointing earnings announcement and sank deeper (about 3.7 percent) following Schultz’s letter to employees that slammed Trump’s policies.
Schultz’s action serves as a warning to investors that they need to be aware of the CEO’s personal politics and whether the chief executive will create an unnecessary controversy by expressing those views.
Judging by the timing, Schultz let his progressive heart guide a hasty, emotional reaction, ignoring the predictable response by Trump supporters.
His letter said the American Dream is “being called into question” and claimed he was hearing from employees “that the civility and human rights we have all taken for granted for so long are under attack.”
Unleashing his frustration over the new president, Schultz discussed company actions challenging policies that are near and dear to Trump’s supporters.
Schultz expressed actions he is taking to support the Deferred Action for Childhood Arrivals program and mentioned Starbucks employees are “Dreamers.”
He touted the company’s history of hiring refugees and said Starbucks would be “doubling down” on this effort with “plans to hire 10,000 of them over five years in the 75 countries around the world where Starbucks does business.” As part of this effort in the U.S., he wants to employ refugees that support our armed forces.
Under the heading of “Building Bridges, Not Walls, With Mexico,” Schultz discussed the company’s investment in the country, adding the company would support Mexicans affected by trade and restrictions on immigration.
Finally, Schultz said eligible employees would have access to a company health care plan if the Affordable Care Act is repealed.
The response to Schultz’s letter was prompt and brutal on social media with posts calling for a boycott.
Facebook posts slammed Starbucks for its intention to hire refugees over American workers and U.S veterans.
Twitter rocked the company as well. Fortune reported #BoycottStarbucks was the top trending topic on Twitter the day after the Schultz letter.
Social media also distributed derogatory cartoons including a Starbucks store rebranded as “ShariaBucks” with a banner “Now Hiring: Muslim Refugees.”
Starbucks responded to the social media onslaught by emphasizing the company has a policy that encourages hiring veterans and active duty spouses.
Despite the company’s effort to respond to critics, its brand is damaged. The social media blitz and news stories labeled Starbucks as putting refugees before veterans.
Starbucks shareholders are paying the price because of Schultz’s inexcusable self-inflicted wound.
You don’t need to have a Ph.D. in political science to realize political passions are running extremely high, and no good can come from taking a position that conflicts with “America first.”
Like many on the Left, Schultz failed to recognize the mood of the country and the political land mines for not thinking about the consequences of his actions.
Schultz’s fumble exposes a management liability at progressive companies. While Starbucks touts diversity as a core value, the celebration of differences doesn’t apply to political thought. In many companies, conservatives are either absent or treated like social pariahs.
Starbucks is especially vulnerable to consumer backlash. First, Schultz previously used his company as his personal political soapbox. He has commented on race and told gun owners not to carry in their stores.
He also told a shareholder to sell his shares because the individual thought Starbucks’ support of a gay marriage referendum in Washington was bad for business.
Unlike Silicon Valley companies that expressed opposition to Trump’s executive order, Starbucks is a consumer product company with viable competing coffee alternatives on almost every corner.
Other progressive CEOs with vulnerable consumer brands have exercised restraint and not exposed their companies to backlash from Trump supporters.
After making a critical comment about Trump following the election, PepsiCo CEO Indra Nooyi — a Hillary Clinton supporter — quickly recovered. She joined the president’s group of business leaders, the Strategic and Policy Forum.
Similarly, Disney CEO Bob Iger, a long-time backer of Hillary Clinton, also joined Trump’s business group.
Nooyi and Iger’s decision to join the Trump Train is recognition that they are putting shareholders before their personal politics.
Starbucks shareholders wish Schultz would do the same. (For more from the author of “Starbucks Gets Scalded in Backlash After CEO Criticizes Trump’s Travel Ban EO” please click HERE)